Impact Of Hotel Decision On IDA Lawsuit Uncertain

By Stephanie Mariel Petrellese

Counsel for the Village of Garden City and Garden City School District are still waiting for a judge to decide their case against the Town of Hempstead Industrial Development Agency which challenges the IDA's granting of tax assistance to the then-proposed buyer of the Garden City Hotel.

The deal between the proposed buyer at the time, Allen Rosenberg, and the Garden City Hotel, was never completed and a lawsuit between those parties ensued. Nassau State Supreme Court Justice Stephen A. Bucaria recently decided that Rosenberg defaulted by not closing on time. Although it would appear that this decision makes the Village and school district's lawsuit against the IDA moot, the impact on the current lawsuit is still uncertain.

Although the Village and school district's lawsuit began in July, months after Justice Bucaria claims Rosenberg was in default, he credits the village and school district with "derailing" Rosenberg's attempt to secure tax breaks from the IDA with their legal action against the agency. "The purpose of the lawsuit was not to harm the developer in any way, shape or form," said school district counsel Bonnie L. Gorham. "The purpose was to prevent the Town of Hempstead IDA from granting an expansive tax abatement that was unwarranted by existing law, and to protect the taxpayers of Garden City against the erosion of the tax base by an unauthorized grant of a tax abatement."

On July 8th, a temporary restraining order halting the sale of the Garden City Hotel was issued by a state Supreme Court judge in Mineola. In return, an attorney for Alrose filed a $20-million notice of claim against the village and school district, contending that his client would lose a $6-million deposit if the deal with the current hotel owners did not close on time.

Later that month, the Village and school district decided not to pursue a preliminary injunction against the sale. However, they moved forward with the portion of the suit which challenges the IDA's granting of tax assistance to Alrose.

In June, the IDA approved a deal with Alrose which froze the property's current $1.7 million total for school, county and village taxes for three years. The corporation was to make payments in lieu of taxes, known as PILOTs, which would increase modestly over the next seven years. The hotel would have been required to pay its full share of real estate taxes beginning in the eleventh year. The agreement also included sales tax exemptions for the hotel renovation and exemption from a one percent mortgage recording fee.

Albert Chase, Garden City School District's assistant superintendent for business and finance, estimated that the district would experience a loss of $2.8 million in tax revenue over the 10-year period.